Fix and Flip vs Buy and Hold - Find The Best Investment Strategy in 2023
Timing is everything! This is especially true when it comes to real estate investing. If you’re thinking about purchasing a piece of property to eventually resell, then it’s important to decide on which tactic you plan to use.
There are two ways to do this - fix and flip vs buy and hold.
The buy and hold method of real estate investing involves an investor purchasing and holding onto a piece of property until its market value increases. The fix and flip method, on the other hand, is used when an investor wants to buy a property to renovate, then resell at a higher value.
Both methods of investing are great ways to make plenty of money, however, timing can dictate which one is better for your situation. For example, those willing to commit a lot of time to their investment might see more benefit from using the buy and hold method. The buy and hold method is perfect for those looking for a long-term investment, but those wanting to see profits quickly will likely prefer the fix and flip method.
It’s always important to have a strategy before committing to an investment. Make sure to do plenty of research and have a specific budget in place.
Now before we settle the debate of fix and flip vs buy and hold, you need to think about financing. After all, there is no debate between fix and flip vs buy and hold if you cannot afford a flipping mortgage.
So, in order to ensure you get your choice between fix and flip vs buy and hold, click the link below to book your free strategy call today with LendCity.
Making money by buying and holding
While there is a lot of waiting involved when using the buy and hold method, you can still make some money before getting that big payday. Many people choose to rent out their property while waiting for its market value to increase. This will allow you to make some income from the property during the period between buying and selling.
Before investing in a property, it’s important to do research on the area. Make sure you aren’t investing in a property that shows no signs of increasing in value. A real estate professional can usually help you decide whether a property is worth buying and holding onto. A good way to decide whether a property is worth investing in is by checking the area’s population growth over the last few years. If the area has shown a steady decline in population, then you may want to move on.
Learning when to fix and flip
You can use the fix and flip method on pretty much any type of real estate property, including houses, commercial buildings and apartments. If you’re interested in fixing up a property for resale, then it’s important to thoroughly inspect the property first.
If there are too many expensive repairs required for a certain property, then it might be best to move on. The purpose of using the fix and flip method is to make a profit—if you spend too much on repairs, then making money might not be possible.
However, if you have the right property at hand, you'll quickly see why some investors prefer fix and flip vs buy and hold.
How much time are you willing to commit? The benefits of fix and flip vs buy and hold
The amount of time you’re willing to commit to an investment will strongly dictate which method you should choose. There can be a lot of waiting involved when using the buy and hold method. Even if you’ve done plenty of research, the market can be hard to predict. You could end up sitting on the property for a long time before having the opportunity to sell. That said, if you have more time to commit then using the buy and bold method could result in huge profits, depending on the property’s growth in value.
With the fix and flip method, you’ll usually make less of a time commitment. Making renovations on a home for resale can still take a long time, but you won’t have to worry about upkeep on the property after renovations are done. There’s usually a quick turnaround when using the fix and flip method, so you can often enjoy your profits soon after purchasing the property.
How much work are you willing to put in?
The commitment of hard work you’re willing to put into a property should be a deciding factor in which method you choose to use. That said, both methods of real estate investing require plenty of work. When it comes to the fix and flip method, you’ll have to put a lot of effort into fixing up the property. This means finding the right contractors and purchasing quality materials. You’ll also have to make sure to property looks good enough for resale.
When using the buy and hold method, you’ll have to work on finding tenants and maintaining the property. Finding the right tenants can be a strenuous job, as you’ll usually want people who will stay for a while and pay their rent on time. The buy and hold method also requires that you keep checking for updates on the market, so you don’t miss the perfect opportunity to sell.
With both methods, it’s usually best to hire someone to help you sell the property. A good real estate professional can help you find buyers and get the best price for your property.
Discover How To Flip A House With This Step By Step Guide
What does your budget look like?
In addition to a time commitment, investing in property also requires a monetary commitment. Does your initial budget allow for the purchase of a property as well as the cost of renovations? If so, then either method would probably work well for your needs and wants.
When you’re looking for a quick return on your investment, however, then it’s better to go with the fix and flip method. With the buy and hold method, you’ll probably be waiting a while before you see a return on your investments. Are you able to wait in hopes of eventually seeing higher profits? Or, do you need to make money as soon as possible? Knowing the answer to these questions makes it easy to choose the right method of real estate investing.
When should you buy? Fix and Flip vs Buy and Hold Timing
With both types of real estate investing, it’s important to wait for the perfect opportunity to buy. If you purchase a property when its value is at an all-time high, then you probably won’t make a profit no matter which method you go with. Do plenty of research on the area around a property and decide whether it’s the right time to purchase. After all, the answer to the question of fix and flip vs buy and hold should always be the strategy that has the best available properties.
As long as you keep timing in mind, you should be able to choose between fix and flip vs buy and hold strategies.
Fix and Flip vs Buy and Hold - Financing Your Investments
Regardless of whether you chose fix and flip vs buy and hold it's best to choose a low rate mortgage. Having the lowest rates in your mortgage will help to improve your cash flow and accelerate the mortgage pay down from your tenant. If your flipping a house, you generally want to go with a lender with the lowest penalties. Keep in mind if the condition of the property is rough, you may only have access to private lenders.
When in doubt, call our team at LendCity Mortgages. You can apply online or reach us at 519-960-0370. We specialize in helping investors just like you on your real estate journey. Alternatively, click the link below so we can discuss fix and flip vs buy and hold strategies over a free strategy call.